Markets to get positive start on Wednesday

Indian equity markets ended flat with a negative bias on Tuesday’s trading session. Today, the start of session is likely to be positive. Traders will be taking some encouragement with an aim to help state governments tide over the financial problems triggered by the Covid-19 pandemic, the Reserve Bank of India (RBI) extended by six months the additional flexibility provided to states to raise funds through market borrowing and overdraft. The RBI in April provided additional flexibility to states and Union Territories (UTs) to raise funds to deal with the Covid-19 crisis. The flexibility was available till September 30, 2020. However, there may be some cautiousness as Nobel Laureate Abhijit Banerjee said India is among the worst performing economies in the world and the government’s economic stimulus was inadequate to tackle the problem. But, he said that the country will see a revival in growth in the July-September quarter of the current fiscal. He said the country's economic growth was slowing down even before the Covid-19 pandemic hit. Market participants may be concerned as private report said the steady rise in caseloads and the spillover effects of the strict lockdown measures will continue to undermine economic growth in the country. It said the recovery now is expected to be gradual as rising infections pose constraints. Even if the growth takes the form of a V-shape, the level of Gross Domestic Product (GDP) will matter. Credit growth has not picked up as envisaged. Meanwhile, the Securities and Exchange Board of India (Sebi) has extended the special dispensations given to companies wanting to go public. The regulator has said the validity of Sebi observations for initial public offerings (IPOs) expiring between October 1, 2020 and March 31, 2021 will be extended till March 31, 2021. Chemical stocks will be in focus as Chemicals & Fertilizers Minister D V Sadananda Gowda said it is a good time to invest in India’s chemical sector that has huge growth potential. The minister said it is a good time to invest in India when the government is focussing on self-sufficiency in domestic production. There will be some buzz in metal stocks as India Ratings and Research (Ind-Ra) has maintained a negative outlook on the base metals sector for 2HFY21. It said business disruptions led by Covid-19 are likely to persist over the next six to nine months, as the pandemic scenario continues to evolve. Also, there will be some buzz in banking stocks as the RBI deferred the implementation of the capital conservation buffer (CCB) requiring banks to set aside additional reserves of 0.625 percent by a further six months due to the COVID-19 pandemic.

Asian markets are trading mostly lower on Wednesday following the weak cues overnight from US markets ahead of the first presidential debate and as investors digested a raft of local economic data. The US markets ended lower on Tuesday ahead of the first presidential debate before the November election.

Back home, Indian equity benchmarks, after swinging between gains and losses, ended flat with negative bias on Tuesday, amid lack of directional cues from domestic as well as global markets. Key gauges made an optimistic start and managed to trade above neutral lines in morning session, as the Reserve Bank of India (RBI) has decided to extend by six months the enhanced borrowing facility provided to banks to meet liquidity shortage till March 31, 2021 amid the ongoing economic woes created by the coronavirus pandemic. Traders also took some solace as the Ministry of Corporate Affairs has extended the duration of several schemes till 31.12.2020 in view of the continued disruption caused due to the COVID-19 pandemic in certain parts of the country and to provide greater Ease of Doing Business. However, volatility struck bourses in late morning session, as ratings agency ICRA revised its forecast for the contraction in India's FY21 GDP to 11 per cent from its earlier assessment of 9.5 per cent. The ratings agency cited the elevated levels of Covid-19 infections at the end of Q2FY21. Domestic investors also turned cautious as the Reserve Bank has postponed the meeting of the Monetary Policy Committee (MPC), the all-important interest rate-setting panel, over a possible lack of quorum as the appointment of independent members is delayed. Trading sentiments remained in lackluster mood in late afternoon deals after the World Bank said the coronavirus pandemic is expected to lead to the slowest growth in more than 50 years in East Asia and the Pacific as well as China, while up to 38 million people are set to be pushed back into poverty. The bank said the region this year is projected to grow by only 0.9%, the lowest rate since 1967. Finally, the BSE Sensex fell 8.41 points or 0.02% to 37,973.22, while the CNX Nifty was down by 5.15 points or 0.05% to 11,222.40.